Leading South African operator Vodacom will buy 100% of local fixed-line player Neotel for R7bn (US$676.7m).
The incumbent first expressed interest in Neotel, which is controlled by Indian telco Tata Communications, last summer.
MTN, number 2 in the…
Leading South African operator Vodacom will buy 100% of local fixed-line player Neotel for R7bn (US$676.7m).
The incumbent first expressed interest in Neotel, which is controlled by Indian telco Tata Communications, last summer.
MTN, number 2 in the mobile market, had also been named as a potential suitor at the time.
Neotel, the country’s second-largest provider of fixed telecoms services, is particularly attractive to mobile operators given its fibre network and spectrum assets.
The company has access to around 15,000 km of fibre-optic cable, in particular in South Africa’s largest cities, and has spectrum in the 1.8 GHz, 800 MHz and 3.5 GHz bands.
Vodacom expects the combination of Neotel with its own fixed enterprise business to create an entity with annual revenues of more than R5bn (US$482.3m), delivering synergies of R900m (US$86.6m).
“The combined business will also be ideally positioned to accelerate broadband connectivity in line with the South African government’s broadband targets, enabling Vodacom to take a leading position in the fibre to the home and fibre to the enterprise segments of the market,” the incumbent said in a statement.
The transaction values the fixed operator at 8.8x annualised operating free cash flow.
Neotel is majority-owned by India’s Tata Communications, which has built up a holding of around 68.5% after assuming initial control with a 56% stake in 2008. The remaining shares are held by Black Economic Empowerment entity Nexus Connexion (19%), and Telecom Namibia’s CommuniTel (12.5%).
Rumours recently suggested that the deal might be delayed because local regulatory authorities were considering preventing the transfer of frequencies.
But a spokesperson for Vodacom, which is majority-owned by Vodafone, told TelecomFinance at the time that the spectrum issue was “not a key consideration at the moment” and would be addressed later in the process.
The deal, which will be funded through cash resources and existing credit facilities, is expected to close before April next year after securing regulatory approvals.
